General management, Risk and uncertainty

What they say and what we hear about risk

When CEOs and other leaders — such as Cabinet Secretaries — say “we need to take more risks”, they don’t really mean it. Or at least, they don’t mean it in the way most of us interpret it.

I was thinking about this after reading Mark Foden’s excellent response to Sir Gus O’Donnell’s recent Telegraph article. If you’ve not read it, you should (Mark’s piece, but also the former Cabinet Secretary’s). The structure of Mark’s response is: (1) Sir Gus O’Donnell is another voice saying government needs to take more risks; (2) the truth is government needs to take fewer risks, which it can do through (3) trying things out in a small way and then learning and adapting, over and over again.

In fact this is a fascinating example of “what they say, and what we hear”. Here is a key part of Mark’s setup:

I infer a model of thinking that goes: The old ideas aren’t working any more… so we need to be innovative and adopt radical new ones… because the ideas are new we don’t know what will happen so this is risky… but we have no choice so that’s OK… if things go wrong we must be mature and learn from the failure rather than throw stones… next time we will know better.

When I looked for those words in the Telegraph article I couldn’t find them. And then I realised why: I was caught out by “I infer…”. Sir Gus didn’t say those words, but Mark heard them (or, more correctly, heard an echo of them).

Similarly there are many times when I’ve heard CEOs and others saying “we must take more risks”. And in retrospect, I think they didn’t actually say that — at least not in the way most of us understand it.

When we hear business leaders talking about taking more risks what they are actually saying is: we must move out of our comfort zone. More broadly they are saying: we have become stuck in our old ways, and become too comfortable, while the world around us has changed; the old certainties are no longer with us so we must work without the old systems that grew out of those old certainties.

And of course, working without old certainties feels like taking more risks. Indeed, less certainty is one key part of risk. (The other is undesirable consequences.)

If you gave pressured CEOs a hard choice between increased risks and a change in the way things get done, I think most of them would opt for the latter.

So many organisations are being disrupted — by digital startups, the internet generally, the economic downturn… The civil service is just one of these. Most leaders facing these problems do not want to increase the risk profile of their organisation. What they want is to sweep away their organisation’s old systems and embrace new ones. That might seem risky to some, but it doesn’t need to be.

To use an analogy: If you meet someone who will only ever cross roads at a pelican crossing then you might see them as someone who is stuck using old, time-consuming methods. They might see you a maverick risk-taker. But if you teach them the Green Cross Code they may learn that there are other ways of achieving their ends without taking undue risks.

Gus O’Donnell did indeed use the phrase “take more risks”, but he used it in the context of breaking away from cumbersome systems of red tape, and so I think he meant it more in the sense of moving out of a comfort zone. He also referenced one of the two keys to success that Mark mentioned: learning from experience. So I don’t think he and Mark are very far apart — if indeed they differ on anything much.

Similarly staff who hear their bosses say “take more risks” might want to reconsider what’s actually being said. Usually it will be: let’s do things differently.

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Discussion

One thought on “What they say and what we hear about risk

  1. Nik, I agree – there are two forms of risk here: personal and organisational. Individuals, especially managers, will need to work in uncomfortably different ways, which at the very least will ‘feel’ risky; and organisations will need to shoulder the inevitable business risks that come with changing things. I think it’s very important that the two should not be confused.

    And thank you very much for your generous comments :)

    Posted by Mark Foden | 4 January 2012, 11:40 pm